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Privatizing water works

Tomorrow, Halifax’s regional councillors will debate whether to harness private-sector expertise to clean up Halifax Harbour. Three private consortia are vying to design, build, operate and eventually transfer to public ownership four new sewage treatment plants. The project would stop the city’s centuries-old practice of dumping raw sewage — currently, more than 43 billion litres a year of the stuff — into the harbour.

The project is vehemently opposed by Water Watch, a coalition of the Canadian Union of Public Employees (CUPE), the Canadian Environmental Law Association (CELA), the Council of Canadians (CoC) and other activists averse to the privatization of water and wastewater services in Halifax or any other Canadian city. The coalition has launched a no-holds-barred campaign — featuring press releases, advertisements, meetings, canvassing, petitions, demonstrations and lobbying — to keep the operation of Halifax’s sewage plants in public hands.

Water Watch largely justifies its stance by pointing to the U.K. water privatization 10 years ago. “The disastrous consequences of privatizing water services in Britain are well known to Canadians,” the coalition maintains. It urges municipal councils to sign an anti-privatization resolution including a “whereas” explaining that “the privatization of water delivery and wastewater treatment in Britain has led to profound problems.” CUPE takes up the theme in its latest annual report on privatization, calling the U.K.’s experience “a clear warning sign for other countries confronting privatization.”

The coalition’s claims, however, are all wet.

Claim #1: Private companies failed to invest in infrastructure.

Water Watch members charge that the U.K.’s private water and wastewater companies have not invested sufficient capital in the system. According to CoC’s Maude Barlow, “little has been reinvested in the ageing infrastructure.” Likewise, CELA maintains that “reinvestment in ageing infrastructure has been meagre at best.” CUPE also charges the water companies with failing to reinvest profits in infrastructure.

In fact, the 10 new water and sewage companies have invested enormous sums in infrastructure over the past decade. By 1998-99, their capital expenditures amounted to £33-billion and showed no sign of letting up. That year alone, investments neared £3.7-billion. When current water and sewage programs are completed, the private companies will have invested £40-billion — more than $92-billion. The bottom line: new primary treatment facilities for more than seven million people, secondary facilities for more than 15 million people, and massive upgrades to treatment plants, water mains and sewers. As one environment department official noted, “You just couldn’t contemplate that kind of expenditure in the absence of privatization.”

Claim #2: Privatization has degraded the environment.

“In the U.K.,” according to CELA’s Sarah Miller, “privatization has meant … increased water pollution violations.” In fact, in the six years following privatization, the percentage of plants complying with their discharge permits increased steadily, from 87% to 97%. Fresh water quality improved significantly. At the time of privatization, 37% of the rivers and canals tested were classified as very good or good; between 1993 and 1995, that figure increased to 59%. Privatization made coastal beaches swimmable. The number of usable beaches in England and Wales increased from 401 in 1989 to 463 in 1999. Compliance with European standards also rose dramatically, climbing from below 76% in 1989 to over 91% in 1999. The environment has clearly benefited from privatization. Indeed, the Environment Agency reports that “most of the environmental damage of the past 200 years will have been repaired by 2005.”

Neither the water companies nor the environmental regulator have yet achieved all they set out to achieve. As the Environment Department’s Michael Williamson explains, “We’re still in the early days of feeling our way … I don’t profess that we’ve got it absolutely right.” However, his caution hardly tempers his enthusiasm: “We’ve got such a wonderful water industry in England and Wales that I can go on madly about privatization.”

Claim #3: Private companies provide unfit drinking water.

CUPE’s Judy Darcy has written on this page that Britain’s water privatization “has left consumers paying more for water that, in many cases, is unfit to drink.” Ms. Darcy hasn’t mentioned that drinking water quality has improved steadily under privatization. Between 1990 and 1996, the percentage of zones fully complying with prescribed limits on individual pesticides increased from 70% to 87%; on lead, from 77% to 87%; on faecal coliforms, from 88% to 96%; on aluminum, from 90% to 97%; and on iron, from 70% to 76%. Smaller improvements occurred for colour, turbidity, odour, taste, hydrogen ion, nitrate, nitrite, manganese, trihalomethanes and other parameters. Only in one category — polyaromatic hydrocarbons — did performance decline. The Drinking Water Inspectorate reports that compliance continues to improve, especially for pesticides and coliforms. In 1998, 99.78% of the 2.8 million tests conducted met the required standard.

Claim #4: Privatization has caused costs to soar.

“When water was privatized in Britain,” CUPE warns, “rates more than doubled.” CUPE may have forgotten to adjust its prices for inflation. The real average cost of unmetered water services rose by 38.3% in the decade following privatization, while the real average cost of unmetered sewage services rose by 46.6%. Of course, costs would have risen in the absence of privatization: The real average cost of water and sewerage services to unmetered domestic customers had climbed more than 22% during the seven years preceding privatization — and that was without major investments in infrastructure.

Private-sector efficiencies have offset costs that would have prompted even greater increases. Between 1993 and 1998, operating costs fell by 9%. Further efficiencies are expected. In November, 1999, the economic regulator reset price limits for all of the water companies, reducing average household bills by 12% in real terms and generally stabilizing them until 2005. In so doing, he explained that thanks to higher efficiencies, the average annual household bill should be only £38 higher in 2005 than it was at the time of privatization.

Claim #5: Privatization deprives the poor of water.

Last month, Ms. Darcy told a Water Watch meeting: “The most frightening development of all since water services were privatized is the hundreds of thousands of people who have had their water disconnected as a result, because they simply can’t afford to pay those inflated prices. And in Great Britain alone, we’re talking about 150,000 families; half a million people in all have had their water disconnected.”

Household water disconnections are a thing of the past in England and Wales, thanks to the 1999 Water Industry Act. But even without the act, disconnections in recent years had fallen from their 1991-92 peak of 21,282 to far below pre-privatization levels. Ms. Darcy should compare the 1,907 households disconnected in 1997-98 to the 9,187 and 9,218 disconnected in the two years preceding privatization.

Claim #6: Privatization is bad for Britons’ health.

Water Watch maintains that privatization in Britain has led to “significant increases in diseases such as dysentery and hepatitis A.” Ms. Darcy elaborates, claiming that as a result of water disconnections, “dysentery has gone up by 600% in Great Britain alone.”

Here again, the facts do not support the alarmist claims. Dysentery did indeed increase in 1992, with 16,960 cases reported that year — levels not seen since the 1960s, when between 19,491 and 43,285 cases were reported annually. Hepatitis A also increased in 1992, by 426 cases, to 7,856. However, privatization’s critics do not mention that in 1993 hepatitis A cases fell to 4,457 — just 84% of the 1989 pre-privatization baseline. They fell further in the following five years, staying at between 25% and 51% of that baseline. In 1996, 1997 and 1998, dysentery rates were also lower than at the time of privatization.

Researchers have found no causal relationship between disconnections and disease. Britain’s Chief Medical Officer, the Faculty of Public Health Medicine, the British Medical Association and the government regulator have all concluded that little evidence links water disconnections and public health.

Water Watch’s one true claim: Privatizers have cut staff.

According to CUPE’s Sid Ryan, the “disastrous results” of privatization in the U.K. included “laying off thousands of workers.” He admits, “As workers, we fear the loss of our jobs as a result of privatization.” His words echo those of CELA’s Ms. Miller, whose own list of “disastrous results” includes “job loss for water and wastewater workers.”

On this issue, Water Watch is right on target. In 1989, the English and Welsh water service companies employed 47,807 people. By 1998, that number was down to 31,310, a reduction of almost 35%. The companies continue to cut staff: In December, 1999, five companies responded to planned reductions in water prices with announcements of 3,200 layoffs.

The Water Watch Web site offers “helpful tips” for anti-privatization crusaders. “If the situation escalates and there’s a threat that water services could be privatized,” it urges, “get creative. The stakes are high.” The coalition has become a little too creative, substituting fiction for fact. But saying something again and again doesn’t make it true.

If the water companies’ role is to keep as many people as possible employed, then Water Watch is correct: Privatization in England and Wales has failed. If, on the contrary, their role is to bring capital to a system long starved of cash, to upgrade and repair crumbling infrastructure, to clean up rivers and beaches, and to provide better water and better service to their customers, privatization looks much more like a success.

A reprint of “Privatizing water works” was used by the United Nations Environment Programme to launch the Public-Private Partnerships in Sewage Management division of the Global Programme of Action for the Protection of the Marine Environment from Land-based Activities (GPA) on-line forum.